REG - Wilmington PLC - Final Results <Origin Href="QuoteRef">WIL.L</Origin> - Part 2
13/09/2017 07:07
- Part 2: For the preceding part double click ID:nRSM5665Qa
3,541 2,602
Retained (losses)/earnings (4,051) (10,116)
Equity attributable to owners of the parent 49,879 42,850
Non-controlling interests 19 86 153
Total equity 49,965 43,003
19
86
153
Total equity
49,965
43,003
Statements of Changes in Equity for the year ended 30 June 2017
Group
At 30 June 2015 49,454 1,052 (364) 4,780 54,922 277 55,199
(Loss)/profit for the year - - - (6,418) (6,418) 143 (6,275)
Other comprehensive income for the year - - 2,966 (2,096) 870 - 870
49,454 1,052 2,602 (3,734) 49,374 420 49,794
Dividends - - - (6,782) (6,782) (141) (6,923)
Issue of share capital 24 (636) - 612 - - -
Share based payments - 470 - - 470 - 470
Tax on share based payments - - - (4) (4) - (4)
Movements in non-controlling interests - - - (208) (208) (126) (334)
At 30 June 2016 49,478 886 2,602 (10,116) 42,850 153 43,003
Profit for the year - - - 12,836 12,836 38 12,874
Other comprehensive income for the year - - 939 36 975 - 975
49,478 886 3,541 2,756 56,661 191 56,852
Dividends - - - (7,150) (7,150) (105) (7,255)
Issue of share capital 13 (466) - 453 - - -
Share based payments - 478 - - 478 - 478
Tax on share based payments - - - (110) (110) - (110)
At 30 June 2017 49,491 898 3,541 (4,051) 49,879 86 49,965
(4,051)
49,879
86
49,965
Cash Flow Statements for the year ended 30 June 2017
Cash flows from operating activities
Cash generated from operations before adjusting items 20 26,653 23,872
Cash flows for adjusting items - operating activities (1,510) (186)
Cash flows from share based payments (87) (180)
Cash generated from operations 25,056 23,506
Interest paid (1,656) (1,502)
Tax paid (3,905) (3,197)
Net cash generated from operating activities 19,495 18,807
Cash flows from investing activities
Purchase of businesses net of cash acquired (19,005) (13,912)
Proceeds from disposal group held for sale - 343
Deferred consideration paid (1,295) (330)
Purchase of non-controlling interests - (334)
Cash flows for adjusting items - investing activities (1,327) (540)
Purchase of property, plant and equipment (1,300) (641)
Cash flows from sale of leasehold property 7,300 -
Proceeds from disposal of property, plant and equipment 43 11
Purchase of intangible assets (1,599) (870)
Net cash used in investing activities (17,183) (16,273)
Cash flows from financing activities
Dividends paid to owners of the parent (7,150) (6,782)
Dividends paid to non-controlling interests (105) (141)
Share issuance costs (5) (5)
Fees relating to new and extended loan facility (146) (631)
Increase in bank loans 27,702 18,002
Decrease in bank loans (25,593) (10,306)
Net cash (used in)/generated from financing activities (5,297) 137
Net (decrease)/increase in cash and cash equivalents, net of bank overdrafts (2,985) 2,671
Cash and cash equivalents, net of bank overdrafts at beginning of the year 12,438 8,698
Exchange gains on cash and cash equivalents 309 1,069
Cash and cash equivalents, net of bank overdrafts at end of the year 9,762 12,438
309
1,069
Cash and cash equivalents, net of bank overdrafts at end of the year
9,762
12,438
Reconciliation of net debt
Cash and cash equivalents at beginning of the year 14,642 9,194
Bank overdrafts at beginning of the year (2,204) (496)
Bank loans at beginning of the year 18 (47,126) (37,306)
Net debt at beginning of the year (34,688) (28,608)
Net (decrease)/increase in cash and cash equivalents (net of bank overdrafts) (2,676) 3,740
Net (drawdown)/repayment in bank loans (2,109) (7,696)
Exchange loss on bank loans (546) (2,124)
Cash and cash equivalents at end of the year 10,687 14,642
Bank overdrafts at end of the year (925) (2,204)
Bank loans at end of the year 18 (49,781) (47,126)
Net debt at end of the year (40,019) (34,688)
Notes to the Financial Statements
1. Nature of the financial statements
The following financial information does not amount to full financial
statements within the meaning of Section 434 of Companies Act 2006. The
financial information has been extracted from the Group's Annual Report and
Financial Statements for the year ended 30 June 2017 on which an unqualified
report has been made by the Company's auditors.
Financial statements for the year ended 30 June 2016 have been delivered to
the Registrar of Companies; the report of the auditors on those accounts was
unqualified and did not contain a statement under Section 498 of the Companies
Act 2006. The 2017 statutory accounts will be delivered in due course.
Copies of the Annual Report and Financial Statements will be posted to
shareholders shortly and will be available from the Company's registered
office at 6-14 Underwood St, London, N1 7JQ.
2. Statement of Accounting Policies
The preliminary announcement for the year ended 30 June 2017 has been prepared
in accordance with International Financial Reporting Standards as adopted by
the European Union. The accounting policies applied in this preliminary
announcement are consistent with those reported in the Group's annual
financial statements for the year ended 30 June 2016 along with new standards
and interpretations which became mandatory for the financial year.
3. Measures of profit
(a) Reconciliation to profit on continuing activities before tax
To provide shareholders with additional understanding of the trading
performance of the Group, Adjusted EBITA has been calculated as Profit before
Tax after adding back:
· amortisation of intangible assets excluding computer software;
· impairment of goodwill and intangible assets;
· adjusting items (included in operating expenses);
· other income - gain on sale of leasehold property; and
· finance costs.
Profit/(loss) before tax 15,862 (3,434)
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Finance costs 1,961 1,920
Adjusted operating profit ('Adjusted EBITA') 23,352 22,042
Depreciation of property, plant and equipment 1,071 911
Amortisation of intangible assets - computer software 1,165 1,050
Adjusted EBITA before depreciation ('Adjusted EBITDA') 25,588 24,003
Adjusted EBITA before depreciation ('Adjusted EBITDA')
25,588
24,003
Adjusted EBITA and Adjusted EBITDA reconcile to profit on continuing
activities before tax as follows:
Profit/(loss) before tax 15,862 (3,434)
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Adjusting items (included in finance costs) - 225
Adjusted profit before tax 21,391 20,347
Adjusted profit before tax
21,391
20,347
Adjusted profit before tax reconciles to profit on continuing activities
before tax as follows:
Adjusted resultsJune 2017 £'000 Adjusting items June 2017£'000 Statutory results June 2017£'000 Adjusted resultsJune 2016 £'000 Adjusting itemsJune 2016 £'000 Statutory resultsJune 2016£'000
Revenue 120,329 - 120,329 105,724 - 105,724
Operating expenses before share based payments, amortisation of intangible assets excluding computer software and impairment (96,425) (3,468) (99,893) (83,119) (2,352) (85,471)
Share based payments (552) - (552) (563) - (563)
Operating expenses before amortisation of intangible assets excluding computer software and impairment (96,977) (3,468) (100,445) (83,682) (2,352) (86,034)
Amortisation of intangible assets excluding computer software - (6,028) (6,028) - (5,545) (5,545)
Impairment of goodwill and intangible assets - (2,366) (2,366) - (15,659) (15,659)
Gain on sale of leasehold property - 6,333 6,333 - - -
Operating profit/(loss) 23,352 (5,529) 17,823 22,042 (23,556) (1,514)
Finance costs (1,961) - (1,961) (1,695) (225) (1,920)
Profit/(loss) before tax 21,391 (5,529) 15,862 20,347 (23,781) (3,434)
(b) Reconciliation to adjusted profit before tax
4. Segmental information
In accordance with IFRS 8 the Group's operating segments are based on the
operating results reviewed by the Board, which represents the chief operating
decision maker. Following a strategic review in the year, the Group now
reports its results in three (previously 4) segments as this more accurately
reflects the way the Group is managed. The comparatives have been restated to
provide information on a consistent basis.
The Group's organisational structure reflects the main communities to which it
provides information, education and networking. The three divisions (Risk &
Compliance, Professional and Healthcare) are the Group's segments and generate
all of the Group's revenue.
The Board considers the business from both a geographic and product
perspective. Geographically, management considers the performance of the Group
between the UK, North America, Europe (excluding the UK) and the Rest of the
World.
(a) Business segments
Risk & Compliance 42,272 12,265 38,802 12,678
Professional 39,472 5,864 36,743 6,159
Healthcare 38,585 9,705 30,179 7,316
Group contribution 120,329 27,834 105,724 26,153
Unallocated central overheads - (3,930) - (3,548)
Share based payments - (552) - (563)
120,329 23,352 105,724 22,042
Amortisation of intangible assets excluding computer software (6,028) (5,545)
Impairment of goodwill and intangibles (2,366) (15,659)
Adjusting items (included in operating expenses) (3,468) (2,352)
Other income - gain on sale of leasehold property 6,333 -
Finance costs (1,961) (1,920)
Profit/(loss) before tax 15,862 (3,434)
Taxation (2,988) (2,841)
Profit/(loss) for the financial year 12,874 (6,275)
(2,841)
Profit/(loss) for the financial year
12,874
(6,275)
There are no intra-segmental revenues which are material for disclosure.
Unallocated central overheads represent head office costs that are not
specifically allocated to segments.
Total assets and liabilities for each reportable segment are not presented, as
such information is not provided to the Board.
(b) Segmental information by geography
The UK is the Group's country of domicile and the Group generates the majority
of its revenue from external customers in the UK. The geographical analysis of
revenue is on the basis of the country of origin in which the customer is
invoiced:
UK 68,588 61,321
Europe (excluding the UK) 18,049 15,859
North America 22,863 19,030
Rest of the World 10,829 9,514
Total revenue 120,329 105,724
Total revenue
120,329
105,724
5. Profit from continuing operations
a) Profit for the year from continuing operations is stated after
charging/(crediting):
Depreciation of property, plant and equipment 1,071 911
Amortisation of intangible assets - computer software 1,165 1,050
Profit on disposal of property, plant and equipment (20) (4)
Rentals under operating leases 1,568 1,110
Share based payments (including social security costs) 552 563
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Gain on sale of leasehold property (6,333) -
Foreign exchange loss (including forward currency contracts) 50 202
Fees payable to the Auditors for the audit of the Company and consolidated financial statements 110 110
Fees payable to the Auditors and its associates for other services:
- The audit of the Company's subsidiaries pursuant to legislation 173 280
- Audit-related and other assurance services 142 41
- Tax compliance services 8 54
- Other services 47 100
- Other services
47
100
b) Adjusting items:
The following items have been charged/(credited) to the Income Statement
during the year but are considered to be adjusting so are shown separately:
Costs written off relating to both successful and aborted acquisitions 1,569 585
Increase in liability for deferred consideration 54 1,082
1,623 1,667
Adjusting items relating to property portfolio review 1,027 -
Restructuring and rationalisation costs 818 612
Legal claim costs (net of settlement received) - 73
Other adjusting items (included in operating expenses) 3,468 2,352
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangible assets 2,366 15,659
Costs relating to the extension of the loan facility - 225
Total adjusting items (classified in profit before tax) 11,862 23,781
Total adjusting items (classified in profit before tax)
11,862
23,781
Successful and aborted acquisitions relate to the acquisition of SWAT Group
Limited ('SWAT'), Health Service Journal ('HSJ') and other aborted
acquisitions. The increase in the liability for deferred consideration relates
to the purchase of SWAT Group Limited ('SWAT').
Restructuring and rationalisation costs comprise primarily of £500,000 of
costs relating to the implementation of project Sixth Gear, and £300,000 of
redundancy and property costs following the Group's decision to relocate part
of the finance function from its head offices in central London to our
existing freehold premises in Basildon, Essex.
Included within operating expenses before depreciation, amortisation and
impairment are £224,000 (2016: £122,000) of minor restructuring costs not
considered to be adjusting items.
Costs associated with property portfolio review relate to a review of the
London property portfolio, see note 4c for further details.
c) Property portfolio review
In the year Wilmington plc performed a review of its London property
portfolio, on the back of this it sold the leasehold interest in its current
Underwood Street London head office premises for a £7.3m cash consideration.
At the same time as disposing of its leasehold interest, Wilmington entered
into a new ten-year market rate lease for a London head office premises near
Aldgate. The new head office space will accommodate Wilmington's London based
businesses whilst retaining the training facility recently acquired with the
acquisition of SWAT Group Limited. The new London premises will consolidate
staff from a number of our current properties therefore in the year we have
also accounted for the surrender of the leasehold of our London Old Broad
Street property and the onerous lease of a leasehold property in Kent.
The items which have been credited/(charged) to profit or loss during the year
in relation to this review are as follows:
Gain on sale of Underwood Street Leasehold property:
Proceeds of sale of Underwood Street Leasehold property 7,300
Disposal of leasehold improvements (579)
Legal and professional fees relating to the sale of Underwood Street Leasehold property (293)
Agent fees relating to the sale of Underwood Street Leasehold property (95)
Gain on sale of leasehold property 6,333
Gain on sale of leasehold property
6,333
Operating expenses - Adjusting items relating to the property portfolio
review:
Rent, rates, and legal and professional fees relating to new Aldgate lease (514)
Cost to surrender Old Broad Street lease (231)
Onerous lease on property in Kent (197)
Accelerated depreciation of computer hardware on sale of Underwood Street Leasehold property (85)
Total adjusting items relating to property portfolio review (1,027)
Total adjusting items relating to property portfolio review
(1,027)
Note 25 Commitments includes the minimum lease commitments associated with the
London property portfolio review.
The net tax charge on the property transaction included in corporation tax
expense is £230,488.
6. Operating expenses
Operating expenses before depreciation, amortisation and impairment 90,906 3,835 94,741 78,275 3,446 81,721
Depreciation of property plant and equipment 976 95 1,071 809 102 911
Amortisation of intangible assets - computer software 1,165 - 1,165 1,050 - 1,050
Operating expenses before amortisation of intangible assets excluding computer software and impairment 93,047 3,930 96,977 80,134 3,548 83,682
Amortisation of intangible assets - databases 1,897 - 1,897 1,643 - 1,643
Amortisation of intangible assets - customer relationships 1,947 - 1,947 1,647 - 1,647
Amortisation of intangible assets - brands 893 - 893 755 - 755
Amortisation of intangible assets - publishing rights and titles 1,291 - 1,291 1,500 - 1,500
Goodwill and intangibles impairment charge 830 1,536 2,366 - 15,659 15,659
Other adjusting items (note 4) - 3,468 3,468 - 2,352 2,352
Operating expenses 99,905 8,934 108,839 85,679 21,559 107,238
-
2,352
2,352
Operating expenses
99,905
8,934
108,839
85,679
21,559
107,238
7. Finance costs
Finance costs comprise:
Interest payable on bank loans and overdrafts 1,814 1,564
Amortisation of capitalised loan arrangement fees 147 131
1,961 1,695
Adjusting items - extension of loan facility costs - 225
1,961 1,920
1,961
1,920
The extension of loan facility costs of £225,000 in the year ended 30 June
2016 comprises £147,000 of old capitalised loan arrangement fees written off
and £78,000 of legal and professional costs connected to the extension.
8. Taxation
Current tax:
UK corporation tax at current rates on UK profits for the year 3,225 2,520
Adjustments in respect of previous years 103 125
3,328 2,645
Foreign tax 1,067 1,272
Adjustment in respect of previous years (43) 73
Total current tax 4,352 3,990
Deferred tax credit (1,247) (971)
Effect on deferred tax of change in corporation tax rate (117) (178)
Total deferred tax (1,364) (1,149)
Taxation 2,988 2,841
Taxation
2,988
2,841
Factors affecting the tax charge for the year:
The effective tax rate is lower (2016: higher) than the average rate of
corporation tax in the UK of 19.75% (2016: 20.00%). The differences are
explained below:
Profit/(loss) before tax 15,862 (3,434)
Profit/(loss) multiplied by the average rate of corporation tax in the year of 19.75% (2016: 20.00%) 3,133 (687)
Tax effects of:
Impairment of goodwill not deductible for tax purposes 303 3,132
Foreign tax rate differences 312 233
Adjustment in respect of previous years 59 198
Reduced effective rate on gain on sale of leasehold property (817) -
Other items not subject to tax 115 143
Effect on deferred tax of change of corporation tax rate (117) (178)
Taxation 2,988 2,841
Taxation
2,988
2,841
On 26 October 2015, the UK corporation tax rate was reduced from 20% to 19%
from 1 April 2017 and a further change was announced on 23 November 2016 to
reduce the rate from 19% to 17% from 1 April 2020. These changes have been
substantively enacted at the balance sheet date and therefore are included in
these financial statements. Deferred tax assets and liabilities are measured
at the rates that are expected to apply in the periods of the reversal,
deferred tax balances at 30 June 2017 have been calculated using the above
rates giving rise to a reduction in the net deferred tax liability of £117,000
(2016: £178,000).
The Company's profits for this accounting year are taxed at an effective rate
of 19.75%.
Included in other comprehensive income are a tax charge of £106,000 and a tax
credit of £97,000 relating to the interest rate swaps and net investment
hedges respectively.
The tax effect of adjusting items as disclosed in note 9 is a credit of
£1,757,000 (2016: £1,579,000).
9. Dividends
Amounts recognised as distributions to owners of the parent in the year:
Final dividends recognised as distributions in the year 4.3 4.0 3,749 3,478
Interim dividends recognised as distributions in the year 3.9 3.8 3,401 3,304
Total dividends paid 7,150 6,782
Final dividend proposed 4.6 4.3 4,011 3,738
Final dividend proposed
4.6
4.3
4,011
3,738
10. Earnings per share
Adjusted earnings per share has been calculated using adjusted earnings
calculated as profit/(loss) after taxation and non-controlling interests but
before:
· amortisation of intangible assets excluding computer software
· impairment of goodwill and intangible assets;
· adjusting items (included in operating expenses);
· other income - gain on sale of leasehold property; and
· adjusting items (included in finance costs).
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings/loss from continuing operations for the purpose of basic earnings per share 12,836 (6,418)
Add/(remove):
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Adjusting items (included in finance costs) - 225
Tax effect of adjustments above (1,757) (1,579)
Adjusted earnings for the purposes of adjusted earnings per share 16,608 15,784
Adjusted earnings for the purposes of adjusted earnings per share
16,608
15,784
Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share 87,193,340 86,846,236
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options 611,052 772,980
Weighted average number of ordinary shares for the purposes of diluted and adjusted diluted earnings per share 87,804,393 87,619,216
Basic earnings/(loss) per share 14.72p (7.39p)
Diluted earnings/(loss) per share 14.62p (7.39p)
Adjusted basic earnings per share ('Adjusted Earnings Per Share') 19.05p 18.17p
Adjusted diluted earnings per share 18.91p 18.01p
Adjusted diluted earnings per share
18.91p
18.01p
11. Acquisitions and disposals
All below acquisitions have been financed out of the extended £85.0m
multi-currency revolving credit facility.
a. Acquisition - SWAT Group Limited - July 2016
On 19 July 2016 Mercia Group Limited, a subsidiary, acquired the entire issued
share capital of SWAT Group Limited ('SWAT'), a provider of training and
technical compliance support to accountancy firms in London and the South West
of England.
SWAT was acquired for initial consideration of £2,870,000, of which £500,000
was withheld in relation to the Net Asset adjustment. Subsequently, this
initial consideration was reduced by £387,538 in relation to the final Net
Asset adjustment.
Deferred consideration of up to £3,000,000 is payable contingent on SWAT's
future performance for the years ended 30 June 2017 and 2018 and will be paid
in cash in one instalment. Management has estimated the expected value of
these future payments to be £1,082,000 which has been recognised in the total
consideration. Any future movements of this contingent consideration will be
charged to the income statement as an adjusting item.
Acquisition related costs of £278,000 have been expensed as an adjusting item
in the income statement (see note 4b).
Details of the fair value of the purchase consideration, the net assets
acquired and goodwill for the acquisition are as follows:
£'000
Purchase consideration:
Initial consideration 2,870
Net asset adjustment (388)
Deferred consideration - to be cash settled 1,082
Total consideration 3,564
The provisional fair values of assets and liabilities recognised as a result
of this acquisition are as follows:
£'000
Intangible assets - Customer relationships 2,337
Total intangible assets 2,337
Property, plant & equipment 183
Computer software 13
Trade and other receivables (net of allowances) 365
Cash and cash equivalents 360
Trade and other payables (598)
Subscriptions and deferred revenue (579)
Current tax liabilities (137)
Deferred tax liabilities (444)
Net identifiable assets acquired 1,500
Goodwill 2,064
Net assets acquired 3,564
The estimated useful economic life of the intangibles is as follows:
Intangible assets - Customer Relationships - Subscribers 10 years
The acquired business contributed revenues of £4,659,359 and contribution of
£658,559 to the Group for the period from the date of acquisition to 30 June
2017. Had SWAT been consolidated from 1 July 2016 the Group consolidated
Income Statement would include pro forma revenue of £5,016,454 and
contribution of £677,811.
At the year the deferred consideration due in respect of the SWAT acquisition
was £1,136,000.
b) Acquisitions - Health Service Journal - January 2017
On 31 January 2017 Wilmington Healthcare Limited, a subsidiary, acquired the
trading assets and liabilities of Health Service Journal ('HSJ'), the UK's
leading health information, insight and networking business from EMAP
Publishing Limited (the 'Seller'). HSJ was acquired for initial consideration
of £17,000,000 in cash with a subsequent adjustment in respect of final
working capital of £250,000 which was due to Wilmington Healthcare Limited.
There is no deferred or contingent consideration in relation to the HSJ
acquisition.
Acquisition related costs of £1,106,000 have been expensed as an adjusting
item in the income statement (see note 4b).
The acquisition adds further strength to the existing Wilmington Healthcare
businesses, and will enable the combined group to provide unparalleled
services into the NHS and private vendor space through subscription
information and analytics products, events, awards, education, and marketing
solutions.
Details of the fair value of the purchase consideration, the net assets
acquired and goodwill for the acquisition are as follows:
£'000
Purchase consideration:
Initial cash paid 17,000
Final working capital adjustment (250)
Settlement of liability on behalf of acquiree 133
Total consideration 16,883
The provisional fair values of assets and liabilities recognised as a result
of this acquisition are as follows:
£'000
Intangible assets - Customer relationships - Subscribers 2,894
Intangible assets - Customer relationships - Sponsors 164
Intangible assets - Customer relationships - Delegates 78
Intangible assets - Customer relationships - Other 366
Intangible assets - Brand 4,240
Total intangible assets 7,742
Trade and other receivables (net of allowances) 814
Trade and other payables (428)
Subscriptions and deferred revenue (2,723)
Deferred tax liabilities (1,389)
Net identifiable assets acquired 4,016
Goodwill 12,867
Net assets acquired 16,883
The goodwill is attributable to the unique HSJ content, established customer
base, and the solid customer relationships held by the experienced and stable
workforce. As well as, the synergies that will arise with the existing
Wilmington Healthcare businesses and the ability to be able to provide a wider
breadth of services and products, across both provider/payer and the private
sector in Pharma and MedTech industries.
The estimated useful economic life of the intangibles is as follows:
Intangible assets - Customer relationships - SubscribersIntangible assets - Customer relationships - SponsorsIntangible assets - Customer relationships - Delegates 8 years 3 years 3 years
Intangible assets - Customer relationships - Other 3 years
Intangible assets - Brand 10 years
The acquired business contributed revenues of 3,695,000 and contribution of
£794,000 to the Group for the period from the date of acquisition to 30 June
2017, which equates to a five months' revenue and contribution. Had HSJ been
consolidated from 1 July 2016 the group consolidated Income Statement would
include pro forma revenue of £9,769,000 and contribution of £2,734,000.
12. Goodwill
Cost £'000
At 1 July 2015 84,028
Additions 7,958
Exchange translation differences 1,401
At 30 June 2016 93,387
Additions 14,931
Reallocation 1,281
Exchange translation differences 589
At 30 June 2017 110,188
Accumulated impairment
At 1 July 2015 6,965
Impairment 15,659
At 30 June 2016 22,624
Impairment 1,536
At 30 June 2017 24,160
Net book amount
At 30 June 2017 86,028
At 30 June 2016 70,763
At 30 June 2015 77,063
A review by management in the year concluded that the tax amortisation benefit
acquired with FRA in 2016 should be reallocated across Goodwill and
Intangibles. This resulted in a reallocation of £1,281,000 from Intangible
Assets to Goodwill, with a nil net impact on non-current assets.
The Group tests goodwill annually for impairment. The recoverable amount of
the goodwill is determined as the higher of the value in use calculation or
fair value less cost of disposal for each cash generating unit ('CGU'). The
value in use calculations use pre-tax cash flow projections based on financial
budgets and forecasts approved by the Board covering a three year period.
These pre-tax cash flows beyond the three year period are extrapolated using
estimated long-term growth rates.
Key assumptions for the value in use calculations are those regarding discount
rates, cash flow forecasts and long-term growth rates. Management has used a
pre-tax discount rate of 12.3% (2016: 12.3%) across all CGUs in the UK except
for the CLT CGU which had a pre-tax discount rate of 13.3% (2016: 13.3%) to
reflect the greater market challenges and risks. A pre-tax discount rate of
13.5% (2016: 13.5%) has been used for Compliance Week and FRA that both
operate in North America. These pre-tax discount rates reflect current market
assessments for the time value of money and the risks associated with the CGUs
as the Group manages its treasury function on a Group-wide basis.
The same discount rate has been used for all CGUs except CLT, Compliance Week
and FRA as the Directors believe that the risks are the same for each other
CGU. The long-term growth rates used are based on management's expectations of
future changes in the markets for each CGU and are 2.0% (2016: 2.0%).
Management's impairment calculations based upon the above assumptions show
ample headroom with the exception of CLT and Compliance Week.
Goodwill is allocated to significant CGUs as follows. A CGU is considered to
be significant if the goodwill allocated to it is greater than 10% of the
total goodwill net book value.
CGU 30 June2017£'000 30 June2016£'000
HSJ 12,867 -
Axco and Pendragon 11,150 11,150
CLT 8,563 8,563
ICT 7,972 7,972
Others 45,476 43,078
86,028 70,763
CLT
For CLT, the value in use exceeds the carrying value by 63% (2016: 0%). The
impairment review of CLT is sensitive to a reasonably possible change in the
key assumptions used; most notably the projected cash flows and the pre-tax
discount rate. The value in use exceeds the carrying value unless any of the
assumptions are changed as follows:
- A decrease in the projected operating cash flows of 38.6% in each of the
next three years; or
- An increase in the pre-tax discount from 12.4% to 18.8%.
Compliance week
For Compliance Week, the value in use exceeds the carrying value by 27% (2016:
15%). The impairment review of Compliance Week is sensitive to a reasonably
possible change in the key assumptions used; most notably the projected cash
flows and the pre-tax discount rate. The value in use exceeds the carrying
value unless any of the assumptions are changed as follows:
- A decrease in the projected operating cash flows of 27.4% in each of the
next three years; or
- An increase in the pre-tax discount from 13.5% to 19.0%.
Impairment of Ark
A non-cash impairment of £1.54m has been made against the carrying value for
goodwill in Ark following the failure to sell the business and the Board's
decision to close all but the events and reports businesses. This impairment
further reflects the impact of structural changes in the legal information and
training market. Ark was acquired by Wilmington plc in October 2005 and the
original investment was impaired last year by £1.03m. It was also decided that
the remaining assets held in the business should be written down to their
recoverable value, resulting in an impairment of £0.83m against the intangible
assets held in the business (see note 13). All remaining items on the balance
sheet are held at their realisable value and are considered recoverable.
13. Intangible assets
Group
Computer software£'000 Databases£'000 Customer relationships £'000 Brands£'000 Publishing rights and titles£'000 Total£'000
Cost
At 1 July 2015 7,063 14,261 15,224 4,000 30,223 70,771
Additions 870 - - - - 870
Acquisitions 191 1,695 2,001 6,086 - 9,973
Disposals - - - - (304) (304)
Exchange translation differences 78 160 798 629 - 1,665
At 30 June 2016 8,202 16,116 18,023 10,715 29,919 82,975
Additions 1,599 - - - - 1,599
Acquisitions 128 - 5,839 4,240 - 10,207
Reallocation - - 391 (1,672) - (1,281)
Disposals (15) - - - - (15)
Exchange translation differences 32 27 102 58 370 589
At 30 June 2017 9,946 16,143 24,355 13,341 30,289 94,074
Accumulated amortisation
At 1 July 2015 4,381 6,512 11,220 2,315 22,707 47,135
Charge for year 1,050 1,643 1,647 755 1,500 6,595
Acquisitions 167 - - - - 167
Disposals - - - - (304) (304)
Exchange translation differences 38 42 68 72 124 344
At 30 June 2016 5,636 8,197 12,935 3,142 24,027 53,937
Charge for year 1,165 1,897 1,947 893 1,291 7,193
Acquisitions 115 - - - - 115
Impairment 86 - - - 744 830
Disposals (14) - - - - (14)
Exchange translation differences 16 16 105 153 (188) 102
At 30 June 2017 7,004 10,110 14,987 4,188 25,874 62,163
Net book amount
At 30 June 2017 2,942 6,033 9,368 9,153 4,415 31,911
At 30 June 2016 2,566 7,919 5,088 7,573 5,892 29,038
At 1 July 2015 2,682 7,749 4,004 1,685 7,516 23,636
Included within computer software are assets under construction that have not
yet been amortised with a net book amount of £142,000 (2016: £44,000).
A review by management in the year concluded that the tax amortisation benefit
acquired with FRA in 2016 should be reallocated across Goodwill and
Intangibles. This resulted in a reallocation of £1,281,000 from Intangible
Assets to Goodwill, with a nil net impact on non-current assets.
14. Property, plant and equipment
Cost
At 1 July 2015 5,950 3,909 3,743 495 14,097
Additions - 312 230 99 641
Acquisitions - 40 28 - 68
Disposals - (189) (42) (107) (338)
Exchange translation differences - 45 73 - 118
At 30 June 2016 5,950 4,117 4,032 487 14,586
Additions - 775 416 109 1,300
Acquisitions - 341 340 87 768
Disposals (2,789) (10) (520) (149) (3,468)
Exchange translation differences - 16 24 - 40
At 30 June 2017 3,161 5,239 4,292 534 13,226
Accumulated depreciation
At 1 July 2015 2,721 2,922 3,394 219 9,256
Charge for the year 158 394 270 89 911
Disposals - (189) (42) (91) (322)
Acquisitions - 26 - - 26
Exchange translation differences - 34 53 - 87
At 30 June 2016 2,879 3,187 3,675 217 9,958
Charge for the year 151 540 275 105 1,071
Disposals (2,210) (10) (520) (126) (2,866)
Acquisitions - 227 315 43 585
Exchange translation differences - 12 22 - 34
At 30 June 2017 820 3,956 3,767 239 8,782
Net book amount
At 30 June 2017 2,341 1,283 525 295 4,444
At 30 June 2016 3,071 930 357 270 4,628
At 30 June 2015 3,229 987 349 276 4,841
At 30 June 2015
3,229
987
349
276
4,841
Included in land, freehold and leasehold buildings is £970,000 (2016:
£970,000) of non-depreciated land.
Depreciation of property, plant and equipment is charged to operating expenses
within the Income Statement.
The disposal of land, freehold and leasehold buildings is the sale of a
leasehold property from which a gain on sale of £6,333,000 arose (note 4c).
15. Trade and other receivables
Current
Trade receivables 23,207 21,993
Prepayments and other receivables 5,237 4,128
28,444 26,121
5,237
4,128
28,444
26,121
16. Derivative financial investments
Group
30 June2017£'000 30 June2016£'000
Current liabilities
Interest rate swap - maturing in November 2016 - (162)
Forward currency contracts - (851)
- (1,013)
Non-current liabilities
Interest rate swaps - maturing in November 2020 (662) (1,037)
17. Trade and other payables
Group
30 June2017£'000 30 June2016£'000
Trade and other payables 25,357 21,591
Subscriptions and deferred revenue 26,973 22,305
52,330 43,896
18. Borrowings
Bank overdrafts 925 2,204
925 2,204
Non-current liability
Bank loans 49,781 47,126
Capitalised loan arrangement fees (428) (429)
Bank loans net of loan arrangement fees 49,353 46,697
(428)
(429)
Bank loans net of loan arrangement fees
49,353
46,697
Bank overdrafts comprise of the net of gross overdraft balances of £13.2m
(2016: £10.3m) and cash positions of £12.3m (2016: £8.1m) held at Barclays
Bank PLC in certain UK companies included in the offsetting agreement.
The £1,000 decrease in capitalised loan arrangement fees reflects the net
impact of a £146,000 payment of fees relating to the extension of the Group's
£85m revolving multi-currency credit facility, and an amortisation charge of
(£147,000).
19. Non-controlling interests
At 30 June 2015 277
Profit for the year 143
Dividends paid (141)
Movements in non-controlling interests (126)
At 30 June 2016 153
Profit for the year 38
Dividends paid (105)
At 30 June 2017 86
At 30 June 2017
86
20. Cash generated from operations
Profit/(loss) from continuing operations before income tax 15,862 (3,434)
Other adjusting items (included in operating expenses) 3,468 2,352
Gain on sale of leasehold property (6,333) -
Depreciation of property, plant and equipment
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